T.C. Memo. 2017-120
UNITED STATES TAX COURT
KENTON R. FLEMING, Petitioner v.
COMMISSIONER OF INTERNAL REVENUE, Respondent
Docket No. 26391-14. Filed June 20, 2017.
Kenton R. Fleming, pro se.
Christopher D. Bradley, for respondent.
MEMORANDUM FINDINGS OF FACT AND OPINION
PUGH, Judge: Respondent determined deficiencies and additions to tax as
follows:1
1
Unless otherwise indicated, all section references are to the Internal
Revenue Code in effect for the years in issue, and all Rule references are to the
(continued...)
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[*2] Additions to tax
Year Deficiency Sec. 6651(a)(1) Sec. 6651(a)(2)
2010 $7,463 $689 $582
2011 7,844 1,092 631
FINDINGS OF FACT
Some of the facts have been deemed stipulated under Rule 91(f). Petitioner
lived in Georgia at the time he filed the petition. During 2010 and 2011 petitioner
was an employee of Southern Polytechnic State University (SPSU) in Marietta,
Georgia. In 2010 petitioner earned $56,078 in wages from SPSU, and in 2011 he
earned $56,364. Those wages were reflected on Forms W-2, Wage and Tax
Statement, and reported to respondent. Petitioner neither filed tax returns nor
made payments aside from withholdings for either tax year.
Respondent filed substitutes for returns for petitioner pursuant to section
6020(b) reflecting a filing status of single and claiming standard deductions for
both 2010 and 2011. Respondent then issued notices of deficiency to petitioner
based on those substitutes for returns. On November 4, 2014, petitioner timely
petitioned the Court for redetermination of his tax liabilities. As shown on
1
(...continued)
Tax Court Rules of Practice and Procedure. Amounts are rounded to the nearest
dollar.
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[*3] respondent’s transcripts for petitioner’s accounts, on December 15, 2014,
respondent erroneously assessed the amounts determined in the notices of
deficiency for 2010 and 2011. On March 10, 2015, respondent entered a litigation
freeze (Code 520) on petitioner’s accounts. On June 1, 2015, respondent reversed
the erroneous assessments and sent petitioner two corresponding Notices CP21E,
one for each year, reflecting a “zero balance” for each year.
OPINION
I. Petitioner’s Tax Liabilities
Under section 61(a), gross income includes all income from whatever
source derived, including wages. The Commissioner may reconstruct a taxpayer’s
wages from third-party payer reports such as Forms W-2. Parker v.
Commissioner, 117 F.3d 785 (5th Cir. 1997); Andrews v. Commissioner, T.C.
Memo. 1998-316; White v. Commissioner, T.C. Memo. 1997-459. Items of gross
income are includible in gross income for the taxable year in which the cash-basis
taxpayer received them. Sec. 451.
Petitioner testified that he received the wages from SPSU but offered no
evidence regarding deductions or credits, even after we explained that the purpose
of the trial was to redetermine his income and deductions. His sole challenge to
respondent’s notices of deficiency was that respondent issued him Notices CP21E
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[*4] on June 1, 2015, that each showed a zero balance, and his account transcripts
showed a zero balance. He argues that those documents should be presumed
correct and that they establish that he owes no tax. We agree that these documents
are correct but they do not prove he has no liability for 2010 or 2011. They show
only that no liability has been assessed.
Under section 6212, if the IRS determines that there is a deficiency in
Federal income tax (defined in section 6211(a) as the amount by which taxes owed
exceeds taxes paid), then the IRS must issue a notice of deficiency to the taxpayer,
as was done here. The IRS must wait 90 days to assess the tax determined to be
owed in that deficiency notice (or 150 days for notices mailed to foreign
addresses). Additionally, under section 6213(a) the IRS is barred from assessing a
taxpayer’s outstanding tax liability if the taxpayer files a petition for
redetermination within that 90-day period; and the IRS will remain barred from
assessing the liability while the taxpayer’s case is pending before us. That is what
happened here. As we explained to petitioner, the trial was to establish
petitioner’s liabilities. Once we determine his liabilities and enter our decision,
respondent must assess those amounts. See sec. 6215(a). Assessment then will be
made by recording the liabilities for the tax owed on petitioner’s account
transcript. See sec. 6203. On the basis of evidence offered at trial we hold that
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[*5] petitioner’s liabilities are as respondent determined in the notice of
deficiency.
II. Additions to Tax
Respondent determined that petitioner is liable for additions to tax for 2010
and 2011 under section 6651(a)(1), for failure timely to file a valid return; and
section 6651(a)(2), for failure timely to pay tax shown on a return.
Section 6651(a)(1) authorizes the imposition of an addition to tax for failure
timely to file a return unless it is shown that such failure is due to reasonable cause
and not willful neglect. See United States v. Boyle, 469 U.S. 241, 245 (1985). A
failure timely to file a Federal income tax return is due to reasonable cause if the
taxpayer exercised ordinary business care and prudence but nevertheless was
unable to file the return within the prescribed time, typically for reasons outside
the taxpayer’s control. See McMahan v. Commissioner, 114 F.3d 366, 369 (2d
Cir. 1997), aff’g T.C. Memo. 1995-547; sec. 301.6651-1(c)(1), Proced. & Admin.
Regs.
Section 6651(a)(2) imposes an addition to tax for failure timely to pay the
amount shown as tax on a return unless the failure was due to reasonable cause
and not willful neglect. A substitute for return constitutes “the return filed by the
taxpayer” for purposes of determining the amount of an addition to tax under
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[*6] section 6651(a)(2). See sec. 6651(g)(1); Wheeler v. Commissioner, 127 T.C.
200, 208-209 (2006), aff’d, 521 F.3d 1289 (10th Cir. 2008); Cabirac v.
Commissioner, 120 T.C. 163, 170 (2003), aff’d without published opinion, 94
A.F.T.R. 2d 2004-5490 (3d Cir. 2004).
The Commissioner bears the burden of production with respect to a
taxpayer’s liability for additions to tax. See sec. 7491(c); Higbee v.
Commissioner, 116 T.C. 438, 446 (2001). Once the Commissioner carries the
burden of production, the taxpayer must come forward with persuasive evidence
that the Commissioner’s determination is incorrect or that the taxpayer had an
affirmative defense, such as reasonable cause and good faith. See Higbee v.
Commissioner, 116 T.C. at 446-447.
We hold that respondent satisfied his burden of establishing that petitioner
was required to file returns for 2010 and 2011 but failed to do so. See sec.
6012(a)(1)(A) (providing that taxpayers must file returns unless their gross income
does not exceed the sum of the personal exemption and the standard deduction for
those years). We also hold that petitioner failed to pay tax shown as due on valid
substitutes for returns for 2010 and 2011 prepared by respondent under section
6020(b). See Wheeler v. Commissioner, 127 T.C. at 210 (2006). Petitioner failed
to offer any evidence of reasonable cause or raise any other challenge to these
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[*7] additions to tax beyond his argument that the IRS records showed he had a
“zero balance”. Accordingly, petitioner is liable for the additions to tax under
section 6651(a)(1) and (2).
III. Section 6673
Section 6673(a)(1) authorizes the Court to require a taxpayer to pay a
penalty to the United States in an amount not to exceed $25,000 whenever it
appears to the Court that the taxpayer instituted or maintained the proceeding
primarily for delay or that the taxpayer’s position in the proceeding is frivolous or
groundless.
Petitioner was warned about maintaining frivolous positions and should be
familiar with the consequences as we have imposed this penalty on him in the
past.2 In several prior cases he conceded his liability rather than going to trial.
We believe that he knew that the arguments in this case were frivolous. And the
record before us shows that this case was delayed unnecessarily by his vexatious
tactics, including his refusal to provide a working telephone number; his refusal to
stipulate certain issues, requiring respondent to move for an order to show cause
2
In Fleming v. Commissioner, docket No. 14357-10L, by Order and
Decision entered March 16, 2012, this Court granted respondent’s Motion for
Summary Judgment and to Impose a Penalty Under Sec. 6673 and imposed a
penalty of $1,500 against petitioner.
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[*8] why certain proposed facts and evidence should not be established pursuant
to Rule 91(f); and his repeated protestations at trial that no one had explained the
erroneous assessment to him, even though it was explained in connection with
respondent’s motion for summary judgment. Nonetheless, petitioner did respond
to these motions, and on the basis of those responses we denied respondent’s
motions in part. We therefore are constrained not to impose a penalty at this time
but again warn him that his arguments and tactics--including tactics that seem
intended primarily to delay--may result in further and greater penalties in the
future should he persist in making them.
To reflect the foregoing,
Decision will be entered for
respondent.